The Australian dollar against the USD shows attractive buying action after experiencing a decline in the Asia session, approaching the 200-day Simple Moving Average (SMA) which has technical significance. On Tuesday, the currency pair saw a positive change for the second consecutive day. The spot price also showed further recovery from the one-week low reached on Monday. Currently, the pair is trading in the range of 0.6765-0.6770, up more than 0.40% throughout the day.
 
Recent confidence regarding additional stimulus measures from China continues to support gains in Asian stock markets and provides benefits to the Australian dollar (AUD), which is typically influenced by risk. State news agency Xinhua reported statements from the Politburo, the highest decision-making body of the ruling Communist Party, indicating that China will enhance economic policy adjustments with a focus on boosting domestic demand, strengthening confidence, and reducing risks. This, along with a moderate weakening of the US dollar (USD), is seen as an additional factor driving the rise in the AUD/USD pair.
 
This is evident as the USD Index (DXY), which measures the strength of the US dollar against a basket of other currencies, has declined from the two-week high it previously reached. Currently, DXY appears to have halted its five-day recovery movement after hitting its lowest level since April 2022 last week.
 
The decline in USD value is likely due to some profit-taking actions, and its potential for further decline may be limited as traders await new signals regarding the Federal Reserve's (Fed) future interest rate hike plans. Therefore, current attention is focused on the highly anticipated FOMC monetary policy meeting results over the two days, which will be announced on Wednesday.
 
The Fed is generally expected to raise interest rates by 25 basis points. However, market participants remain skeptical about whether the US central bank will adopt a more dovish stance or stick to its forecast of a 50 basis point hike by the end of this year.
 
This indicates that investors will be watching the accompanying policy statements as well as comments from Fed Chair Jerome Powell to assess the central bank's policy outlook. These factors will play a crucial role in influencing USD price dynamics in the short term and help determine the next direction for the AUD/USD pair.
 
Meanwhile, the release of the US Consumer Confidence Index and the Richmond Manufacturing Index from the Conference Board on Tuesday may have some impact on the early trading session in North America. Market attention will then shift to the Australian consumer inflation figures released on Wednesday. This week's busy economic agenda also highlights the previously released US second-quarter GDP report and the Fed's preferred inflation gauge—the Core PCE Price Index. Important events from central banks, along with these key macroeconomic data, are likely to induce volatility in the AUD/USD currency pair.

Warning!
 
This analysis is based on fundamental and technical perspectives from trusted sources and does not constitute advice or solicitation. Always remember that this content aims to enrich the reader's information. Always conduct independent research regarding other forex information as a reference for your trading.
 
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